I created a terrain in blender. I then exported it as an fbx. I opened the fbx in 3d exchange. I then pressed the add to iClone library button. When I opened iClone the terrain I had made was in the custom prop folder. I cannot figure out how to add it to the terrain folder. It seems like there should be an easier way than using file manager. Also, are terrains any different than props in how Reallusion treats them? (For things like following terrain for character movement?) Or are props and terrains treated the same but just in different folders for user interface ease of use?

When you select your prop, do a right click on it and you should be able to select "convert to terrain"

Terrains are useful when you want to place trees or grass for example, in order them to be placed on the right surface. I believe it's also used for paths, when you set points it goes by default on the terrain's surface.

Thanks, this ^ is correct.